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Cash-rich Monaco present taxing problem for French football

By John Sinnott, CNN
June 1, 2013 -- Updated 1439 GMT (2239 HKT)
Is this the most glamorous location for a professional footballer? Is this the most glamorous location for a professional footballer?
Sun, sea -- and no tax
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  • Monaco looks set to become preferred destination of world class footballers
  • Russian owner Dmitry Rybolovlev is worth $9.1 billion according to Forbes
  • Under the principality's laws, foreigners do not pay tax on their wages
  • French Football Federation (FFF) rule the club must move their head office to France

(CNN) -- Favored haunt of James Bond, gamblers, luxury yacht owners and Grace Kelly fans, Monaco looks increasingly set to also become the preferred destination of any self-respecting world class footballer.

And who can blame them. What's not to like about the chance to strut your stuff in one of the world's most glamorous locations -- and not pay tax on your wages.

Monaco have come a long way in a very short space of time and, with the money the club's Russian owner Dmitry Rybolovlev has to spend, it is a team that has every chance of upsetting the status quo in French football next season.

When Rybolovlev -- worth $9.1 billion, according to Forbes -- bought a majority stake in the seven-time French champions in December 2011, Monaco were bottom of French football's second tier.

Fast forward a couple of years and Monaco have served notice of the extent of their ambitions by spending close to $180 million on signing Atletico Madrid striker Radamel Falcao, as well as Porto pair Joao Moutinho and James Rodriguez.

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This, just a matter of weeks after wrapping up the second-flight title, with a young side coached by experienced Italian Claudio Ranieri.

"It's hard to think of a more serious statement of intent," former Monaco chief executive Tor-Kristian Karlsen told CNN.

"Falcao is simply the best out-and-out center forward in the world. With a signing of this caliber (Real Madrid's experienced Portugal defender Ricardo Carvalho will also play for Monaco next season), French football will seriously start closing the gap on the top European leagues."

Read: Monaco splash out $90 million on Porto pair

These are signings that are likely to give newly crowned French champions Paris Saint-Germain, another club revived by massive investment, a run for their money in defending their Ligue 1 title.

"Everything is possible," said Karlsen. "The team that won Ligue 2 -- even without the new acquisitions -- would have stabilized itself in the top eight of Ligue 1.

"But one should allow for the team to settle in the top half of Ligue 1 before expecting silverware," added Karlsen, who left Monaco in February after just over a year at the club.

Monaco's upwardly mobile progression evokes memories of Chelsea's transformation after another Russian billionaire Roman Abramovich took control in 2003.

In financial peril before the Russian oligarch arrived, Chelsea's trophy cabinet room is now brim to overflowing with 11 cups captured in the space of 10 years during the Abramovich era.

Though at a no little cost. Abramovich has gone through nine managers, not to mention an estimated $1.5 billion of investment in players and wages.

When Abramovich took charge of Chelsea, Ranieri was in charge of the team, but was sacked after one season and replaced by Jose Mourinho -- despite having led the club to second in the Premier League and to the semifinals of the Champions League.

"Ranieri is an excellent manager," said Karlsen, who stepped down from the chief executive role before the club's promotion due to personal reasons. "He was -- and, in my opinion, still is -- the ideal manager for this project.

"The experience, the class, the professionalism he brought has been immensely important," added Karlsen, who had previously been Monaco's sporting director before his promotion to the chief executive role in September.

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"He is very pragmatic, is aware of the politics of the game and just as importantly he's a great ambassador. "

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Not that Monaco's "grand projet" has been universally welcomed by all in French football.

Under the principality's laws, foreigners do not pay tax on their wages and that has put Monaco at odds with the French Football Federation (FFF) and the French League (LFP) after the latter organization ruled that the club must move their head office to France by the start of June next year.

"Monaco has enjoyed a position in French football that is totally unfair and that hasn't been questioned," France Football's English correspondent Philippe Auclair told CNN.

"The club has enjoyed an unfair advantage over every French club. Monaco should be subjected to the same tax regime as the other clubs in Ligue 1," added Auclair, who acknowledged that the French football authorities have allowed this anomaly to go on for too long.

"In any other country this would be unthinkable. Imagine if Welsh clubs Cardiff and Swansea didn't operate under the same taxation regime as the other 18 English Premier League clubs?

"The league has a perfect right to ask Monaco for this and the law should have been applied a long time ago."

Read: The curious transfer of Claudio Yacob

But Monaco are refusing to play ball and have threatened to take legal action over the dispute.

"As part of this legal action, ASM FC will be seeking the annulment of the LFP's decision of March 21 requiring the club to establish its headquarters in France, as well as a claim for damages from the LFP as compensation for financial and commercial losses suffered as a result of that decision," Monaco said in a statement earlier this month.

Monaco said French Federation president Noel Le Graet, "acting on behalf of both the FFF and the LFP, demanded from AS Monaco FC a huge payment of $258 million in return for ending the current conflict without the club having to relocate its headquarters to France in order to remain in the French Championship."

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Neither Le Graet or the LFP responded to CNN's request for comment.

The French Football Federation then issued a statement, insisting it was Monaco who brought up the figure.

"The FFF had decided (on April 18) to set up a meeting between the Federation, the French Professional League (LFP) and AS Monaco FC. Preliminary talks started with representatives from AS Monaco FC, during which the sum of $258 million was mentioned by AS Monaco FC," said the FFF.

"My personal opinion is that AS Monaco has been treated disgracefully by the French football authorities," said Karlsen. "What Monaco are doing is to the wider benefit of the French game.

"French football should welcome this foreign investment -- it makes the league stronger, improves the competitive balance and brings much-needed global exposure."

Karlsen suggested that the French authorities were in danger of "shooting themselves in the foot," pointing out that when he was working for the club, Monaco had spent $6.4 million on Delvin N'Dinga from Auxerre.

"At the time Auxerre were struggling financially and on the brink of going out of business.

Rybolovlev ... was a supporter of the club long before he took over as majority shareholder. He sees his involvement as giving something back to the country
Former Monaco chief executive Tor-Kristian Karlsen

"Before the signing of Falcao, Moutinho and Rodriguez, I suspect the strategy had been to sign mainly French players from the domestic transfer market, but the club may well have reversed that strategy due to the scandalously poor treatment they have recently received from the French football authorities."

Before Rybolovlev's arrival, Monaco had been regular participants in European club competition until a steady decline set in, culminating in their relegation to Ligue 2 in 2011.

"Rybolovlev is very analytical and studious," said Karlsen of his former boss.

"He comes from a family of doctors and that is the way he has built his businesses -- by careful analysis.

"He's an avid student of the game. Whenever you go to his office you'll always find analytical books on the subject of football on his table, I'm obviously not talking about books like 'Fever Pitch,' " said Karlsen, referring to Nick Hornby's book about football fandom.

"He is very knowledgeable about football and for him the strategy is quite simple -- to be successful," added the Norwegian, who before joining Monaco as technical director in January 2012 worked as a scout for Zenit St. Petersburg.

"Since he took over, the financial commitment has been amazing.

"He has always delivered on his promise to be successful and he won't settle for second best."

However given Monaco's average attendance last season was just over 5,000, the question remains how Monaco will meet UEFA's Financial Fair Play rules, which requires clubs to only spend money they earn, if and when the principality club qualifies for Europe.

For now, though, those few thousand Monaco supporters can look forward to the treat of watching some of Europe's finest players.

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